WTI fades an uptick above $ 66 mark, record US output weighs

• Oil steadies as high seasonal demand offset by rising US production.
• Exposed to further downside risks on a break below $ 65.50.

WTI (oil futures on NYMEX) extended its downside consolidation phase near two-month lows in the European session, having reversed an upward spike just ahead of the $ 66 mark.

The upside attempts remain capped amid looming concerns over surging US production levels while prospects of higher OPEC supplies continue to undermine the sentiment around the black gold. The US drillers added two oil rigs in the week to June 1, bringing the total to 861, the most since March 2015, energy services firm Baker Hughes showed on Friday.

Meanwhile, the downside appears cushioned on the back of persisting risk-on market profile, reflected by rising US Treasury yields and higher European equities. Also, markets seem to digest the outcome of the weekend’s meeting held between the Arab oil ministers, in which they emphasized the need for continued cooperation between the OPEC and non-OPEC members  to balance the global supply.

Focus now remains on the weekly US crude supplies report for fresh insights on the US supply-side scenario, which could trigger fresh oil moves going forward.

WTI Technical levels

Slobodan Drvenica at Windsor Brokers noted: “Consolidation is likely to precede fresh weakness, with broken daily cloud top ($66.86) expected to cap upticks and maintain bearish bias. Break below $65.49 would expose $64.62 (base of rising daily cloud) and could extend towards $63.73 (Fibo 61.8% of $58.06/$72.89). Conversely, break and close above daily cloud top would sideline downside risk and signal stronger recovery. Res:  66.02; 66.86; 67.49; 68.23. Sup:  65.49; 65.31; 64.62; 63.73.”